Correlation Between TripAdvisor and Huazhu

Can any of the company-specific risk be diversified away by investing in both TripAdvisor and Huazhu at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining TripAdvisor and Huazhu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TripAdvisor and Huazhu Group, you can compare the effects of market volatilities on TripAdvisor and Huazhu and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in TripAdvisor with a short position of Huazhu. Check out your portfolio center. Please also check ongoing floating volatility patterns of TripAdvisor and Huazhu.

Diversification Opportunities for TripAdvisor and Huazhu

-0.42

Correlation Coefficient

TripAdvisor  Huazhu

Very good diversification

The 3 months correlation between TripAdvisor and Huazhu is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding TripAdvisor and Huazhu Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huazhu Group and TripAdvisor is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on TripAdvisor are associated (or correlated) with Huazhu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huazhu Group has no effect on the direction of TripAdvisor i.e., TripAdvisor and Huazhu go up and down completely randomly.

Pair Corralation between TripAdvisor and Huazhu

Given the investment horizon of 90 days TripAdvisor is expected to generate 3.9 times less return on investment than Huazhu. In addition to that, TripAdvisor is 1.39 times more volatile than Huazhu Group. It trades about 0.02 of its total potential returns per unit of risk. Huazhu Group is currently generating about 0.11 per unit of volatility. If you would invest  3,341  in Huazhu Group on December 27, 2024 and sell it today you would earn a total of  467.00  from holding Huazhu Group or generate 13.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

TripAdvisor  vs.  Huazhu Group

TripAdvisor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TripAdvisor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, TripAdvisor is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Huazhu Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huazhu Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Huazhu unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TripAdvisor and Huazhu

The main advantage of trading using opposite TripAdvisor and Huazhu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TripAdvisor position performs unexpectedly, Huazhu can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Huazhu will offset losses from the drop in Huazhu's long position.

The idea behind TripAdvisor and Huazhu Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.